Contents :

1. INTRODUCTION

An airline consultancy agreement ("Agreement") was entered into by AirAsia Berhad (hereinafter referred to as "the Company" or "AirAsia") with Wordison Limited trading as PlaneConsult.com Pte Ltd ("Wordison") on 1st May 2004 which expired on 30th April 2006 and renewable upon mutually acceptable terms for the description of service as stipulated below.

Mr. Conor McCarthy, a Non-Executive Director of the Company, together with his wife, own the entire share capital of Wordison consisting of two shares.

The Board of Directors of AirAsia wishes to announce that it had on 31st May 2006 renewed the above-mentioned Agreement for a period of one year.

2. DESCRIPTION OF SERVICE

Wordison provided the services in relation to advice on Low Cost Airline operations, fleet acquisition, route planning, aero politics, regulatory factors, market demographics, competitive positioning /scenarios and financial requirements ("Services"). There shall be no change to the description of the Services.

3. BASIS OF CONSIDERATION

Wordison shall be paid an aggregate annual consideration of RM2.12 million ("Fee") for the duration of the Agreement and Wordison shall be reimbursed for expenses directly related to duty travel, during visit or stay with AirAsia or during a visit by AirAsia staff, suppliers, agents or officers with Wordison at their premises. The Fee charged is mutually agreed by AirAsia and Wordison on an arm's length basis and based on market value.

4. FINANCIAL EFFECTS

4.1 Share capital and substantial shareholders' shareholding
The Agreement would not have any effect on the issued and paid up share capital of AirAsia nor the substantial shareholders' shareholdings of AirAsia.

4.2 Earnings
The Agreement did not have any impact on the earnings and the earnings per share of AirAsia Group for the financial year ending 30th June 2006.

4.3 Net Tangible Assets ("NTA")
The Agreement would not have any effect on the NTA of AirAsia Group for the financial year ending 30th June 2006.

4.4 Gearing
The Agreement would not have any impact on the gearing of AirAsia Group for the financial year ending 30th June 2006.

5. RATIONALE OF ENTERING INTO THE AGREEMENT

AirAsia is entering into the Agreement to benefit from Services which could enhance its ability to operate efficiently and effectively respond to competition as a low cost carrier in the Asian region and maximize its growth potential, profits and shareholder value.

6. APPROVAL REQUIRED

AirAsia did not require the approval of shareholders of AirAsia or any authorities to enter into the Agreement.

7. DIRECTORS' AND MAJOR SHAREHOLDERS' INTEREST

The Agreement is deemed a Related Party Transaction under the Listing Requirements of the Bursa Malaysia Securities Berhad. Mr. Conor McCarthy is a Non-Executive Director of the Company. Accordingly, Mr. McCarthy has abstained from approving the Agreement by the Board of Directors of AirAsia.

8. STATEMENT FROM THE BOARD OF DIRECTORS

After considering all aspects of the Agreement, the Board of Directors of AirAsia is of the opinion that entering into the Agreement is in the best interests of the AirAsia Group.

9. OTHER MATTERS

All relevant documents relating to the Agreement are available for inspection during normal office hours at AirAsia's registered office at 25-5, Block H, Jalan PJU 1/37, Dataran Prima, 47301 Petaling Jaya, Selangor Darul Ehsan.

BY ORDER OF THE BOARD OF DIRECTORS OF AIRASIA
JASMINDAR KAUR
(Company Secretary)
(MAICSA 7002687)

This announcement is dated 31 May 2006.

Announcement Info